Canadian Oil Sands Ltd.'s profit in the third quarter has plummeted by 65 per cent as "unplanned outages" at its only project continue to dog the company – troubles that forced it to again axe production expectations for 2014.
The company, which is Syncrude Canada Ltd.'s largest shareholder, on Thursday said it made $87-million or 18 cents per share, compared with $246-million or 51 cents per share in the same quarter last year.
Canadian Oil Sands said it expects Syncrude to produce between 95 million and 100 million barrels of oil in 2014, down from its July estimate of between 95 million and 102 million. The July forecast was down from an April prediction of between 95 million and 105 million barrels in the year. In January, Canadian Oil Sands said Syncrude would churn out between 95 million and 110 million barrels of oil in 2014.
Production reductions have become the norm for this aging mining project. Syncrude chopped production guidance three times in 2013 because of hiccups at its major facilities.
Canadian Oil Sands in a press release said foreign exchange losses in 2014, as opposed to gains in 2013, are the primary factor behind the tumble. Costs also climbed by $28-million, which the company attributed to higher natural gas prices and "additional maintenance associated with outages on sulphur processing units."
The Calgary-based company owns 36.74 per cent of Syncrude. Imperial Oil, which is controlled by Exxon Mobil Mobil Corp., controls 25 per cent and operates the project. Suncor Energy Inc. owns 12 per cent of Syncrude; Sinopec, a Chinese state-owned enterprise, holds 9.03 per cent; CNOOC Ltd., another Chinese government-owned oil outfit, holds 7.23 per cent; Mocal Energy Ltd., a Japanese concern, owns 5 per cent; and Murphy Oil Corp. holds the remaining 5 per cent.
Canadian Oil Sands said it is 99 per cent done its $3.9-billion Mildred Lake mine train replacement effort.
"This signals that Syncrude's major capital projects are winding down and the associated financing risk is coming out of the business," Ryan Kubik, Canadian Oil Sands chief executive, said in the press release.
The company brushed off falling oil prices. "With spending on major capital projects coming to an end, [Canadian Oil Sands] is positioned to fully fund its business in this current environment of lower crude oil prices," the press release said.
Steve Williams, Suncor's top executive, is among those troubled by Syncrude's shaky performance.
"We and the operator [have] been disappointed in the performance of the assets," he said in a conference call Thursday, according to a transcript published by Thomson Reuters. "We're encouraged and Exxon and Imperial are absolutely right up there amongst the best of the operators of assets in the world."
Suncor and Syncrude's original mines and plants sit side-by-side. They are the two oldest projects in Alberta's oil sands.
"There are some particular challenges around oil sands and particularly the location and some of the conditions we have to work with," Mr. Williams said. "So we work closely with them [the operators] to try and get the best out of those assets."
Canadian Oil Sands' cash flow from operations also fell in the quarter, hitting $302-million, down from $340-million this time last year. Syncrude produced 22.5 million barrels of synthetic oil in the quarter, compared to 20.9 million in the same quarter last year.